What does it take to launch a successful MVNO? White Paper

White Paper
What does it take to launch a successful MVNO?
Updated 2010
© The Besen Group, LLC.
All Rights Reserved.
In this white paper, we will be considering some key questions executive
management address in order to launch a successful MVNO. Our first
edition of this white paper was published on January 2005. Note that only
some sections have been updated.
The Besen Group, LLC.
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© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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Alex Besen
He is the Founder & CEO of The Besen Group LLC.
He provides advisory and training services to corporate executives in the mobile data
industry. He manages the firm’s network of independent consultants and channel partners
and interacts with his advisors. Alex has over 16 years of hands-on experience in the mobile
industry working for operators and vendors in North America and Europe in numerous roles
including business development, marketing, project management and finance. He has been
working with mobile network operators in developing their wholesale business models,
advising MVNOs to launch their mobile and mobile data services as well as helping MVNEs
with their service portfolios.
Previously, Alex worked at Ericsson with mobile operators on MVNO and UMTS projects in
the EMEA (Europe, Middle East and Africa) region. He was also responsible for identifying
potential partners and hosting workshops at Ericsson Mobility World (a mobile data
laboratory) where developers create, optimize and commercialize mobile applications.
Prior to this position, Alex was employed at T-Mobile USA (formerly known as Omnipoint
Communications) where he was responsible for partnerships, and joint ventures and
provided billing, customer care, marketing and vendor financing solutions to mobile
Alex began his mobile career with Pocket Communications based in Washington, DC where
he managed the company’s auction activity for C-block spectrum licenses as well as other
activities associated with market research, market segmentation, pricing plans and market
distribution strategies.
Alex holds a BS degree in Management from the University of Tampa and an MBA degree in
International Business from the American University. Alex is fluent in French, Turkish and
proficient in Italian.
He has delivered a 4G wholesale business presentation to FCC in October 2010. In addition,
he has spoken at MVNO Industry Summit 2010, Eurasia Com 2009, Mobile World Congress
2008, MVNO Summit 2008, MVNO Summit 2007, MVNO Congress 2007, Emerging Mobile
Partnerships & MVNOs Conference 2007, CTIA Wireless 2006, CTIA Wireless 2005 and is
quoted frequently in the leading telecommunications and media publications.
He can be contacted at: [email protected]
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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There is no exact book
definition for MVNOs.
The term does not imply a specific network
architecture or to a specific mobile
It depends on the type of
services MVNO will offer in the marketplace.
Definition from The Besen Group: “An
MVNO is an organization that offers mobile
and mobile data services with or without
Market Overview:
Based on the available market information, there are more than 80 MVNOs today in the US
alone. Some have already launched their services, some are evaluating their business
models, and some do not know what mobile and mobile data strategy they should follow.
As MVNOs enter the mobile market, we will see lower prices for subscribers and the
introduction of multiple mobile data applications that will help MVNOs to differentiate
themselves from the competition and in return provide higher margins to their financial
bottom line.
MVNOs will focus heavily on mobile data services to increase their ARPU by relying on nextgeneration mobile networks. With the advent of these mobile networks, non-mobile players
will also consider entering into the mobile market with the objective of leveraging their
brand, attractiveness of their services and controlling their customers.
We expect that once the mobile market is matured and uncompetitive MVNOs are
withdrawn or acquired, the remaining players will seek to improve profitability through
economies of scale or scope.
Business Model Options for MVNOs:
Buys bulk airtime from the HNO and resells to target segments
Service Provider:
Provides services over the mobile platform
Enhanced Service Provider: Combines the reseller and the service provider business models
Owns portion of the mobile network with or without SIM cards
depending on choice of mobile technology of the HNO
Complete MVNO:
Has more control of the mobile network and enables multioperator agreements
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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Where will MVNOs come from?
• Traditional landline operators planning to add
mobile services
• Mobile operators planning to enter into
international markets
• Companies with strong brand names
• Companies who could not obtain 3G/4G licenses
and 3G/4G Greenfielders
• Companies from telecom, media, and internet
Sample HNO Evaluation Criteria for potential MVNOs:
• Large own customer base
• Strong distribution network
• Strong market position
• Low traffic intentions
• Niche market segment
• Economic strength
• Mobile competence
• International reciprocity
• Geographic submarkets
• Initial Public Offering
Sample Strategy Development Workshop for a MVNO:
• Target segments
• Market positioning
• Offering
• Technology
• Customer care
• Distribution
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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What does it take to launch a successful MVNO?
Based on our hands-on experience, we can share with you
how each prospective MVNO should carefully assess its
strategy, management team, understanding of mobile
networks, and the potential of mobile data services and its
business plan.
Key Questions:
• What is the business strategy and what are the launch objectives?
Offer bundle communications solution? Go global?
Extend the number of services? Create synergies?
Is this a new business for the MVNO or an expansion of its current business?
Support existing customer base? Leverage brand name value? Differentiation?
• Will the MVNO use a CRM tool? And how?
• What partnerships does the MVNO need to look at?
• What vendors is the MVNO planning to work with?
• Is the MVNO planning to brand its own SIM cards?
• How will the MVNO distribute its service to its customers?
• What market segment does the MVNO planning to target?
• What is the commitment from the executive management?
• What steps should the MVNO take as a part of its strategy?
• Is the MVNO planning to offer roaming services including data?
• What price does the MVNO will pay to the HNO for network access?
• Where does the MVNO want to go with its initiative in the long term?
• Do executive management understand the mobile data market drivers?
• Is the MVNO familiar with handling customer care and billing services?
• How does the MVNO see the operating environment in the near future?
• What price does the MVNO will pay to the MVNE for mobile data services?
• Who is going to issue SIM cards? Is the MVNO familiar with SIM card vendors?
• What mobile data applications is the MVNO planning to offer for its customers?
• Is the MVNO familiar with the life of typical mobile data application? i.e. 2 months
• Does the MVNO understand its customers’ profiles, behaviors, and spending patterns?
• What is the hands-on experience of the executive management from the mobile industry?
• Does the MVNO know how to structure revenue sharing arrangements with other players?
• Does the MVNO know how to calculate its ARPU based on minutes, kilobytes, SMS and MMS?
• Does the MVNO understand the different mobile data (infrastructure) enablers? i.e. Wap Gateway
• If the MVNO chooses to host its own mobile data services without the MVNE, is the MVNO familiar
with the required infrastructure (Capex), costs (Opex), applications?
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Business Case:
The main objectives of the
business case are to improve quality of planning
and decision-making, reduce the decision risk and
more importantly influence or even shape the
future of MVNO environment favorably.
It is an
revenues, capital and operating expenditures are
linked to the financial model.
The traditional values of brand, functionality and quality will be more important for the MVNO than any
mobile technology. This is worth bearing in mind, since the benefits of mobile data services may vary
greatly by applications area and user segment.
As the mobile market is changing from an
environment dominated by voice to one where mobile data services are equally as important. This is
not an easy transition, as it requires adaptation to new service concepts and new technologies. It also
demands cross-industry partnerships and new business models, accompanied by a re-organization of
the value chain.
Business Case Structure:
We suggest MVNOs to follow the following business case structure for their decision-making.
Few key questions for the business case:
• What are the effects of different pricing schemes?
• Which mobile data services take the most capacity?
• What are the effects of revenue share arrangements?
• Which mobile data services have the highest contribution?
• How mobile data services and price plans complement each other?
• How mobile data services and price plans capture from each other?
MVNOs who can proactively address these questions and manage their revenues and investments in
key functional areas will be successful in this competitive marketplace. They will also maximize their
return on investment and shareholder value.
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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Key Acronyms:
ARPU: Average Revenue Per User
HNO: Host Network Operator
MMS: Multimedia Messaging Service
MVCP: Mobile Virtual Consulting Practice
MVNE: Mobile Virtual Network Enabler
MVNO: Mobile Virtual Network Operator
Additional Acronyms:
AMPU: Average Margin Per User
BGW: Billing Gateway
BPS: Bits Per Second
CAD: Confirmed Advertisements Delivered
CCBS: Customer Care Billing System
CDR: Call Detail Record
CPGA: Cost Per Gross Addition
EBITDA: Earnings Before Interest Taxes Depreciation and Amortization
FCF: Free Cash Flow
IRR: Internal Rate of Return
LBS: Location Based Services
MMSC: Multi Media Messaging Center
MOU: Minutes of Use
NPV: Net Present Value
OSS: Operations and Maintenance Sub-System
QoS: Quality of Service
SIM: Subscriber Identity Module
SMS: Short Messaging Service
WACC: Weighted Average Cost of Capital
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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About The Besen Group
The Besen Group LLC is an international management consulting
practice to the mobile data industry headquartered in the
Washington DC area, with representatives in Paris and Tokyo.
The Besen Group brings global perspective and an open approach
to client engagements, where the transfer of our mobile data
knowledge, hands-on experience, and strategic thinking become
part of our clients’ ongoing competitive strength.
Its mission is to provide mobile data players with tools,
knowledge, and services enabling them to perform optimally in
their mobile environment. The Besen Group’s competitive edge is
based on practical experience with mobile operators, mobile
vendors, and a mobile data laboratory.
Our references include Avea, Banque Populaire, Bristol Edge,
Clearwire, Cosmote, Leclerc Mobile, Ericsson, Fenerbahce,
Mportal, Mpower Labs, SpeechPhone, and T-Mobile USA.
The Besen Group offers the following four (4) service
portfolios: Mobile Data Service Portfolio, MVNO Service Portfolio,
MVNE Service Portfolio and HNO Service Portfolio.
All of our services are tailored to ensure that each of our clients'
needs are met and surpassed. We work on a project basis or
retainer basis with mobile operators, MVNOs, MVNEs, mobile
vendors, law firms, investment banks, venture capital and private
equity firms from all around the world.
© 2010 The Besen Group, LLC. All Rights Reserved. Reproduction or quotation in whole or in part without permission is forbidden.
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